During 2000, as we interviewed dozens of the top marketers who specialize in targeting the small business and SOHO marketplace, three key trends began to emerge. Marketers for Web sites, such as Office.com, start-ups such as vJungle, and traditionally offline companies such as NEBS, all agreed that market segmentation, partnerships, and mixed media campaigns are critical elements to online success.

Here, in time for the start of 2001, is a special report with the best of these leading marketers' advice on these three topics. We hope you find it useful.

SEGMENTATION

John Warrillow, President Warrillow & Co, said it most dramatically, "Forget about the small business market. It doesn't exist! It's made up at a smaller submarket level. More often people will categorize themselves by vertical."

Josh Jones, AtYourBusiness.com's Director of Marketing agreed, "Just as consumers aren't a monolithic group, neither is small business. Many small businesses align themselves more closely with industry groups than with businesses that happen to bethe same size as theirs. So one of the challenges is whether to spread the net with a general small business message, or be more focused and speak to businesses by sector."

NEBS, a company with more than two million small business customers, has successfully marketed both offline and online by targeting each vertical segment specifically. NEBS VP Marketing, Susan Nawrocki told us her best advice for other marketers is rather than marketing to small business generically, you should talk to them based upon the type of business they are. Make your pitch relevant to their business -- as a landscaper, as a florist, as an accountant.

After conducting over 100 focus groups, Office.com also learned that small businesses are more likely to identify with their vertical industry. Eric Jones, Director of Communications explained, "A 10 person ad agency thinks of itself as an ad agency, not a small business.” That's why Office.com built its site around industry lines.

Other experts advised us that small businesses should also be segmented by other demographics, such as age, size and speed of growth. Robert Duboff of Ernst & Young said, "Typically in my experience, people say it's a family business or we're entrepreneurs. Yet, I don't know of people who are really targeting family businesses." Stuart Feil, of Bredin Business Information agreed, "A lot of marketers still don't have a thorough understanding of the small business environment. Part of it is defining a segment ... the home-based business is not going to be the same as the five-person business, and that's not going to be the same as the 80-person business. And the five-person 10-year-old business is very different from the five person 10-month-old business."

Priscilla Huff, author of "101 Best Home-Business Success Secrets for Women", warned us that there is a definite art to marketing to female entrepreneurs and small business owners. For example, she noted women prefer in-depth answer to questions, brusque explanations will turn them off. Women are also more likely to participate in viral, friend-get-a-friend campaigns.

Our Conclusion: Just because your product, service or site is something that should appeal to a broad range of small businesses, your marketing shouldn't be. Slice your marketplace into its various verticals and demographics and then approach it that way.

PARTNERING

Trust is such a huge thing in the small biz segment," vJungle CEO Deepak Amin told us, "You can't go out there tomorrow and say 'I'm a new ASP, I've got great technology, buy from me!' They won't do that." Therefore Amin counsels all new and lesser-known brands to partner online with more established companies.

Stuart Feil of Bredin Business Information explained that in addition to the "trust" factor, it's also very expensive to do business on the Web alone without partnerships. "For a while, we were seeing two to three new ventures every week or so, all targeting the small business environment. Now, they are finding out it costs a lot of money to actually get a brand identity. Now we are seeing the concept of ingredient marketing. Rather than position itself as a brand name to the small business customer, the company’s business model calls for it to be an ingredient to a larger brand. For example, Rivio has struck alliances with Bank of America and Fleet. Not only do they have the brand name, but they have regular communications with the small business customer. Rivio doesn’t have to spend its budget on building that brand name. It is able to leverage the strengths of the financial services companies."

In fact, marketing partnerships between online newcomers and established brand names were prolific in 2000. A few examples:

ePolicy allied with Intuit, Inc.

salesforce.com partnered with IBM.

WebNow.com co-branded a site with NEBS.

USA.NET allied with dozens of vertical portals such as Address.com, Colorado.com, holaHoy.com, Recruiters World and Zworks.com.

DSL.net partnered with the US Federation of Small Business to offer DSL services to over 12,000 USFSB members.

Even big names got into the act ... Netscape partnered with Office Depot, Kinkos and FedEx by running special promotions for its NetBusiness service at their brick and mortar locations.

Typical partnerships were more than just an advertising deal. Often they included a co-branded Web site or page, special offers and an outbound promotion via email and/or direct mail.

Our Conclusion: Once you have identified the segments of the small business market that are most likely to want your product or service, then seek out and partner with the Web sites and suppliers (both offline and on) these small business people already know well and trust.

When we launched MarketingSherpa last May, our goal was to cover the ways that marketers were reaching small businesses over the Internet. To our surprise, we found most of the marketers we interviewed mentioned offline media as an integral part of their media mix.

Stephanie J. Fierman, VP Marketing, Office.com said, "I wanted to be aggressive and really hit the consumer in every medium possible. So we are out there in TV, radio, print, outdoor and all manners of online. Since we launched, easily 50% to 70% of our traffic has been driven from offline media."

However, lest you think offline media can do the trick alone, she noted, "Offline and online work synergistically. I think sometimes folks in Internet managements don’t recognize that if you are doing both, all boats will rise. Offline increases our online effectiveness and vice versa. So I would expect to see lower results from my online when I’m not spending offline."

Jim Hilt, Manager Sales Management and Operations for IBM.com, echoed this view saying, "IBM makes certain that if an offer is featured in the TV ads, the offer is mirrored on the website. Coordination of the offline and online presence is very important." Paige Arnof-Fenn, VP of marketing for inc.com told us she also plans to continue using an integrated mix of online, offline and radio through 2001.

Harry Kniznik, Customer Acquisition Manager for AllBusiness.com said many of his online campaigns for 2000 were "very effective", including blast email, an online sweeps and banners on targeted sites. But he also invested in offline media and there were “noticeable spikes in site traffic when offline ads were running.”

What was the most effective online marketing tactic? Almost everyone agreed it was email marketing. Kniznik noted that shorter versions of email creative worked better than longer copy. The high-tech savvy of the recipient didn't seem to matter -- farmbid.com received a 15-20% response to its email campaigns to farmers! Stephanie Fierman also reported great results -- a 72% open rate and 14% conversion -- for a rich media, streaming video, email campaign she sent to announce the Office.com sweepstakes.

Aside from standard blast email campaigns, many marketers, such as eAttorney, also reported strong results from ad insertions in email newsletters.

Despite the negative publicity banners got in 2000, many of the marketers we spoke to said their banner campaigns were successful enough that they will continue them in 2001. Josh Jones, Director of Marketing for AtYourBusiness.com said, "We were somewhat skeptical when we undertook our online campaign, having been told banners were played out. But we have been pleasantly surprised by the results. As a result we are pursuing an online strategy as an integral part of our marketing strategy."

The key to banner success seemed to be in the media buy. Marketers, like Harry Kniznik, who bought more expensive banners on highly segmented sites, got better results than average. Also, research showed that marketers willing to experiment with unusual banner sizes, such as extra-long vertical "avalanche" banners, could often achieve substantially higher results.

We also heard loads of good things about keyword buys on major search engines. Intaact's VP Marketing Carol Manning said her text ad on Google worked so well, "that we've just added keyword buys on Lycos as well." MyCorporation's CEO Philip Akalp told us "We have found any type of keywordadvertising to be extremely successful." So successful in fact that Akalp's invested in extra buttons and banners against keywords on some search engines just to lock competitors out. He said, "Whenever it's keyword based, we'll buy all the inventory."

Last but not least, in 2000 online PR at last came into its own as a major part of the marketing mix. Dawn Ringel, SVP Gumpert Communications told us online PR works because many small biz owners use the Internet for news to save time in their busy lives. But, getting the story online has its challenges. Online media can be harder to reach than traditional print and television media. They’re not in the regular Bacon’s directory so you’ll have to dig harder to get them.

Our Conclusion: While offline marketing is still important, online tactics have become a critical part of the media mix for marketers targeting small businesses. Your best bet is coordinate all campaigns, offline and online for the highest response rates. As always, the more targeted your media buy, the better the response rate (can we use the word "segmentation" one more time?!) And, yes, banners are still alive and kicking.

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